Australian and New Zealand Dollar Rise Amid China Market Resumption
The Australian and New Zealand dollars maintained gains ahead of the Chinese market's reopening. Investors eagerly await Beijing's yuan midpoint rate determination amidst escalating trade tensions with the United States.
After a tumultuous start to the week, currency market volatility has somewhat subsided. The euro has rebounded above $1.02, currently trading at $1.0374. This coincides with a momentary respite for the dollar.
China's swift retaliatory tariffs against the US have prompted heightened attention towards the yuan's midpoint rate, set by the People's Bank of China (PBOC). Traders anticipate a weaker yuan as a means to mitigate tariff impacts.
The offshore yuan initially plunged to a record low of 7.3765 per dollar but has since partially recovered. The Australian and New Zealand dollars, often mirroring the yuan, held overnight gains. The Aussie stands at $0.6251 after a 0.47% increase on Tuesday, while the kiwi reached $0.5648 with a 0.44% gain.
"PBOC's actions today will provide insight into their approach towards the trade war," said Carol Kong, currency strategist at Commonwealth Bank of Australia. "Our primary expectation is a higher tolerance for currency weakness in response to US tariffs, although it remains uncertain if the PBOC will act immediately."
Elsewhere, the Canadian dollar extended its recovery from Monday's 22-year low to C$1.4333. The Mexican peso steadied at 20.4910 per dollar, above its nearly three-year low of 21.2882 reached on Monday. Sterling remained relatively stable at $1.2479.
Despite escalating trade tensions, markets have shown unexpected resilience, according to Kong. "Optimism stems from the US's willingness to delay tariffs in exchange for concessions from other nations."
The yen strengthened slightly to 154.30 per dollar, while the dollar index remained flat at 108.04.